A Stock or Share is a financial instrument which denotes the extent of ownership in a company or organization which the legal holder of the said instrument enjoys. Commonly used to mean a share, stock can be of various types having completely different rights, privileges and benefits which are available to its legal holders. Let us talk about 10 key things of a stock (or share). The concepts relating to Stock are universally applicable and would therefore hold good for the Australian economy as well.

Type of Stock – The two basic stock types usually available is common stock and preferred stock. Common stock is the more powerful of the two, as the holders of such stock are deemed to be the actual owners of the company. Common stock is also known as Equity Stock.

Rights and powers associated with each type of stock – Holders of common stock enjoy voting rights in key decisions of the company.  Preferred stock holders have no such rights to exercise their opinion, they have rights to receive share in company’s distributed profits only, which are known as dividends.

Stocks are negotiable and commercially trad-able financial instruments – A common stock is usually a negotiable financial instrument and can be commercially exchanged or traded for between two or more persons, for a legal consideration. Preference shares can only be traded, if the rules of the company explicitly provides for such tradability.

Stocks are listed in stock exchanges – Any company which is legally incorporated and has common stock which it intends to offer to general public for sale or purchase must enlist itself with one or more stock exchange in different parts of the world. A stock exchange is a place where shares are traded. Key stock exchanges in Australia are National Stock Exchange (or NSX) and Australia Pacific Exchange.

Liabilities of Stock – Depending on the type of company, the liability associated with a common stock can be limited (in case of public or Limited Liability Company) or unlimited (in the case of private or Unlimited Liability Company). The liability of a preferred stock holder is always limited to the extent of his stock value. Liability here means the extent or share of loss which a stockholder has to bear, in case the company becomes unprofitable.

Stocks can be in physical (or paper form) or non-physical (or electronic) form.

Stock is considered to be the principal source of company’s funds both at the time of incorporation and also subsequently in case of organizational expansion.

The legal return or compensation associated with holding a stock is Dividend. This term is used to mean a share in the company’s distributed profits, which every individual stockholder is entitled to receive.

Stock holders entitlement to receive consideration in case of an organization becoming unprofitable and eventually liquidated (or dissolved) stands last. This means that in case a company is liquidated, all available proceeds would be first utilized to settle the external and unsecured dues (for example payables and creditors) and the residual amount if any, can be distributed amongst stockholders.

Stock can change hands any number of times. A common stock which is   listed in one or more stock exchanges can be purchased and sold for any number of times, provided such transaction is carried out for a legal consideration (which is called the share trading price).